Fair Trade: 5 Things You Should Know

Fair trade functions on the premise that you, the consumer from an industrialized nation, wouldn’t mind paying a premium for goods made by local cooperatives in third world countries — not because the goods are superior to those that can be had elsewhere, but because you want to support these poor communities and be a better global citizen.

Over half of all fair trade organizations are in the Americas, with ones in Colombia and Peru heading the list. Statistics seem to back up the fact that fair trade works; according to TransFair USA, fair trade has produced about $200 million in additional income for farmer and producer organizations since 1998. It has also proven popular with the general public, at least in theory; polls show people believe that buying fair trade accredited products does more to help developing nations, in a more direct manner, than contributing to charity or relying on government aid.

As the fair trade craze gains momentum,here are five things you should know about it.

1- Fair trade has its origins in 1815 England

Fair trade as we know it dates back to the mid 1980s, but the economic principle derives from the concept of comparative advantage, as it was first laid out by Robert Torrens in 1815, and later, by David Ricardo. The driving principle is this: A country such as France, with a leading reputation for making wine, can produce a commodity, like grain, for cheap. But it can be to their advantage to trade with another country for grain if in trade they export wine (i.e. something that they produce efficiently) because when left to what it does well each nation, regardless of the differences in relative productivity, can specialize in their export, creating what economists term a comparative advantage.

2- Next up is fair trade apparel and cosmetics

While coffee continues to dominate (assuming as much as 40% of fair trade production), the year 2010 is certainly seeing the expansion of fair trade producer groups on the U.S. market. If the movement truly began with basic arts and crafts, its new direction is as varied as the countries and cultures hopping on the bandwagon.

For instance, over a dozen areas in the U.S. have earned themselves the designation “Fair Trade towns” by making fair trade products available in local stores, and by showing support from the local government as well as its citizens and local businesses (in California for instance, San Francisco and Chico have the designation, while the same is true for Burlington and Brattleboro in Vermont). Meanwhile, lines of fair trade apparel, linens and cosmetics have already been launched this year in an effort to meet the movement’s growing demand for fair trade products, despite the sagging economy.

3- Ben & Jerry’s will be fully fair trade by 2013

Arguably, because of its global omnipresence and because coffee beans are the flagship product of fair trade, Starbucks (SBUX) has seized much of the early publicity by becoming the largest purchaser of fair trade certified ingredients worldwide. However, they’re going to do have to do a lot more for the movement if they intend to keep up with New England’s Ben & Jerry’s ice cream. In 2005, Ben & Jerry’s became the first company of its kind to use fair trade ingredients, and they have committed to using only fair trade ingredients across all their flavors wherever they’re sold by 2013.

4- Accreditors constantly monitor fair trade producers

For a community of third-world producers, legitimate fair trade accreditation is a potential windfall. As we’ve seen in the hundreds of millions of dollars of additional revenue made through fair trade, there’s plenty of money to be had. And this money is earmarked for the community, helping to build schools, hospitals, homes — whole infrastructures even. But earning that accreditation — meaning earning the Fair Trade Certified Label — is not easy.

A number of criteria must be met in order to get the accreditors’ stamp of approval, including fair labor conditions for the community (defined as freedom of association, living wages, safe working conditions) and a democratically elected organization in each community deciding how to invest the revenues. Additionally, fair trade communities aren’t allowed to use certain pesticides and agrochemicals.

Staying true to these principles isn’t just verified according to the honor code; accreditors understand the enormous value of the label and are known to monitor these groups — as well as withdraw accreditation — if they suspect any form of abuse of the system.

5- Fair trade provides fertile ground for greenwashing

Not surprisingly, with the fair trade craze we’ve seen more than a few instances of corporate greenwashing, in which a company makes a minimal effort at showing some environmental sensibility in an effort to gain positive PR. Groups such as TransFair USA acknowledge the capacity for this kind of cynicism but also feel that they have the standards and practices in place to prevent it.

A prime example of fair trade greenwashing occurred in 2006 when Nestle, the world’s largest food conglomerate, launched its first fair trade product, an instant coffee blend it rather cutely called Partners Blend TM. The launch garnered this otherwise much-beleaguered company lots of good PR, but in reality the product represented a fraction of a fraction of its annual coffee imports, making it a token gesture at best — but one that earned the company the coveted fair trade label.